Re: 7/7/00 - Bogus Web Postings Bite Analyst, Investors
Friday July 7 5:56 PM ET
Bogus Web Postings Bite Analyst, Investors
By Brian Kelleher
NEW YORK (Reuters) - Ashok Kumar, who covers technology stocks for US Bancorp Piper Jaffray, is one of the most candid analysts quoted on the Web.
Problem is, he is not the one behind the colorful comments. Kumar is a victim of bogus Internet postings that falsely quote him as saying the darndest things.
Kumar on Friday morning supposedly revealed a Wall Street tradition of analyst fraud when he was ``quoted'' in a story that ran on Yahoo! Inc.'s (NasdaqNM:YHOO - news) Web site and financial Internet site RagingBull.com (http://www.ragingbull.com).
``If analysts got arrested every time we intentionally manipulated the price of a stock, we'd all be in jail!'' Kumar was quoted as saying on the Web sites. ``Saying that analysts are low-life criminals is a bit of a reality stretch -- don't you think?''
Kumar took the story in stride because it was not the first time his name came up in an imaginary news release.
``It's bizarre,'' he told Reuters. ``This is libel.''
The incident shows how Internet message boards have become the epitome of ``buyer beware'' -- investors should not take postings at face value and investigate any rumors surfacing on the Web.
In fact, U.S. stock market watchdog Securities and Exchange Commission has warned investors to carefully examine information they see on Internet message boards, including the source of the posting; why it is being posted and attempt to verify for themselves if the information is accurate.
The anonymity of most postings and the exuberance of investors sometimes makes this difficult, resulting in unsubstantiated rumors that can grow out of control.
The latest scam, in which Kumar was an unwitting participant, alleged that 24 employees of Salomon Smith Barney, the brokerage arm of financial services group Citigroup Inc. (NYSE:C - news), had been arrested on charges of securities fraud.
``The story is completely false,'' SEC spokeswoman Joanne Bamberger told Reuters, declining to elaborate.
A Salomon Smith Barney spokeswoman also said it was a hoax.
Indeed, the self-proclaimed message poster -- with the Internet identity ``you-rusty-heads'' -- eventually fessed up to the fake note.
``The above accounts in the story are fictional,'' you-rusty-heads posted on Thursday night.
``The story was made to illustrate the deeply seeded (sic) corruption in our capital markets,'' he wrote and continued in to what he called a ``rant'' against brokerage firms and the SEC.
Some false postings in the past have significantly moved share prices, although the price swings only last until cooler heads prevail.
Last year, a Web page designed to look like a story from Bloomberg News trumpeted news that telecommunications company Pairgain Technologies Inc. (NasdaqNM:PAIR - news) was being sold, pumping Pairgain shares up 30 percent.
The news, alas, was false and Pairgain shares quickly came back to earth. Yet the incident was proof that information on message boards should be taken with a large grain of salt.
Despite its warning to investors, the SEC has maintained it has no plans to monitor private communication over the Internet, even if it deals with the stock market.
``The SEC has never had any intention of intercepting or monitoring private transmissions, including conversations taking place in chat rooms or on e-mail, in the pursuit of Internet fraud,'' SEC Chairman Arthur Levitt wrote on April 5.
Yahoo! and RagingBull.com do not monitor their message boards, largely due to the high volume of postings, but each firm responds to complaints from members about fraudulent or offensive messages, representatives for the sites said.
Each service will delete a message if it breaks their individual codes of conduct and a pattern of inappropriate postings can result in suspensions or the cancellation of an account, Yahoo! and RagingBull.com representatives said.
So, the Web can be a Wild West of sorts for investors looking for a hot stock tip.
But for analysts like Ashok Kumar, it also can become high-tech ventriloquism.
dailynews.yahoo.com
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The original post, as best I can find:
SEC arrested 24 in SSB (read carefully)
by: you_rusty_heads
7/6/00 6:20 pm
Msg: 9574 of 9781
SEC Arrests 24 at Solomon Smith Barney
July 6th 2000
NEW YORK (DOW.NW) The SEC today arrested 24 Managing Directors at Salomon Smith Barney and charged them varying counts of stock price manipulation, fraud and conspiracy. These charges stem from an ongoing investigation that
concluded after Wednesday's “downgrades” by SSB semiconductor analyst Jonathan Joseph. Late on Wednesday,
Salomon Fund Managers started accumulating the same stocks (semiconductors including TXN, AMD, NSM, and SSTI)
Joseph downgraded earlier in the day according to SEC officials.
“According to internal documents, Salomon Smith Barney Mutual Fund Managers and High-Net-Worth clients were
instructed to wait until after this announcement before adding to their positions [in semiconductor stocks]” said SEC regulator Jack Lasardi. “Around 1:00 pm EST on July 5th, just hours after the downgrade, [SSB] clients and Fund
Managers began heavy buying within the [semiconductor] sector.” He went on to state that “this is one of the most flagrant abuses [the SEC] has seen.”
Each person arrested could potential face over 25 years in prison and up to 3x monetary damages under Federal
Racketeering Laws. These charges come amid an increasing number of complaints filed by individual investors regarding market manipulation at the SEC Web site (http://www.sec.gov ).
Salomon Smith Barney issued the statement saying, “All of our conduct was in full compliance with the law. These allegations are baseless and unfounded.”
US Bancorp's Ashok Kumar agrees that the charges are unfounded. He noted “of course they did nothing wrong. That's just the way you play the game. If analysts got arrested every time we intentionally manipulated the price of a stock, we'd all be in jail! Saying that analysts are low-life criminals is a bit of a reality stretch – don't you think?”
Others weren't so quick to dismiss the magnitude of today's events. “This landmark case could bring about major changes in the industry,” remarked legal analyst Terry Cohn. “Some regulators are pushing for 'matching ratings' that would more strictly address the so-called 'pump and dump' tactics.”
____________________________________________________________________
The above accounts in the story are fictional – at least the parts about the SEC taking action. The story was made to illustrate the deeply seeded corruption in our capital markets.
Are we really to believe that SSB will be investing less in the semiconductor sector? Does Joseph really believe that flash memory sales have any chance of slowing? No Way. I'm not sure if SSB fund managers bought semi-stocks on Wednesday, but I sure would like to know! We need a stock price manipulation investigation NOW!
In general, I hate when the government gets involved with ANYTHING because they ALWAYS screw it up. But since our
tax dollars already pay for an SEC, they should more vigorously enforce the laws already on the books.
Pump and dump = illegal
“Officially” Downgrade a stock, then buys more = illegal
Perhaps with fed-up investors voicing their opinions to the SEC, these regulatory abuses will be properly investigated and prosecuted. If you too are fed up with "pump and dump" and "Downgrades so funds can load up at lower prices" then
contact the SEC here: sec.gov
and let them know!
The USA: A government for the people, by the people!
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